Generally Accepted Accounting Principles and Case

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Student Cases with Solutions to accompany Accounting & Auditing Research: Tools & Strategies (7th edition)
NOTE: In addition to the in-chapter and end-of-chapter exercises which serve as short cases you will find the following short cases arranged by course title that can also be utilized as short cases that require the student to access the authoritative literature to address the issue presented in the case. Other excellent sources of longer and more detailed cases include the Deloitte Trueblood cases (www.deloitte.com/more/DTF/cases_subj.htm), as well as the AICPA cases (www.aicpa.org).
A topical listing of the cases is presented with the case and solution following the listing.
Topical Index of Student Cases
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Mead pays no funds to Generous Motors or GMCC until it sells the automobile. Mead must then repay the balance of the loan plus interest to GMCC. How should Mead report the acquisition and repayment transactions in its Statement of Cash Flows?
Case 1 Solution:
Problem Identification: How should a company report, if at all, cash and non-cash transactions owed to an entity’s financial subsidiary?
Keywords: Cash flows; financ* subsidiaries; operating income.
Conclusion: Per ASC 230-10-50-5), Mead should exclude transactions that involve no cash payments or receipts. However, per 230-10-45-17, it should record cash payments to GMCC for repayments of principle (and interest thereon) due to suppliers or their subsidiaries as operating cash (out) flows.
Case 2: Narda Corporation agreed to sell all of its capital stock to Effie Corporation for three monthly payments of $200,000. After Effie made the first required payment, it ceased making other payments. The stock subscription agreement states that Effie, thus, forfeits its payments and is entitled to no other future consideration. How should Narda record the $200,000 forfeited payment?
Case 2 Solution:
Problem Identification: How should a company account for forfeited stock subscriptions? Moreover, do such payments constitute operating or other income?
Keywords: Stock Subscription; operating income; additional paid-in capital; owners’ equity; net income; operating income.
Conclusion: Per 505-10-25-2,
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